limiting investment in securities that have higher credit risks

1.   Investment Types and Credit Guidelines

Consistent with the GFOA Policy Statement on State and Local Laws Concerning Investment Practices, the following investments will be permitted by this policy and are those defined by state and local law where applicable. If additional types of securities are approved for investment by public funds by state statute, they will not be eligible for investment by the [entity] until this Policy has been amended and the amended version adopted by the governing body. Typical types of securities include:

•    U.S. Treasury and other government obligations that carry the full faith and credit guarantee of the United States for the payment of principal and interest;

•    Federal Agency or U.S. government sponsored enterprises (GSE) obligations, participations, or other instruments;

•    Bankers’ acceptances;

•    Federally insured time deposits (Non-negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:

a.   The amount per institution is limited to the maximum covered under federal insurance;

•    Time deposits (Non-negotiable certificates of deposit) in state or federally chartered banks, savings and loans, or credit unions in excess of insured amounts which are fully collateralized with securities in accordance with state law;

•    Negotiable certificates of deposit (NCDs);

•    Commercial paper, rated in the highest tier (e.g., A-1, P-1, F-1, or D-1 or higher) by a nationally recognized statistical rating organization;

•    Investment-grade obligations of state, provincial, and local governments and public authorities;

•    Fully collateralized Repurchase agreements collateralized in compliance with this Policy, governed by a SIFMA Master Repurchase Agreement and with a maximum maturity. Capital project funds may be invested in a single flex repurchase agreement with a maximum stated maturity that shall be matched to the expenditure plan;

•    SEC registered money market mutual funds; and

•    Local government investment pools.

IMPORTANT NOTE: If the credit rating of a security is subsequently downgraded below the minimum rating level for a new investment of that security, the Investment Officer shall evaluate the downgrade on a case-by-case basis in order to determine if the security should be held or sold. The Investment Officer will apply the general objectives of safety, liquidity, yield, and legality to make the decision.

2.   Collateralization

Where allowed or required by state law and in accordance with full collateralization will be required on all demand deposit accounts, including checking accounts and negotiable (as authorized by respective state statutes) and non-negotiable certificates of deposit.